Shutdown looms as Congress debates FEMA funding

The government could grind to a halt this weekend if Congress doesn't agree on emergency funding.

NEW YORK (CNNMoney) -- The standoff continues Monday between the House and the Senate over emergency funding, which is holding up a short-term spending measure to keep government running into the new fiscal year that begins this weekend.

The measure includes additional money to fill the almost depleted emergency aid coffers of the Federal Emergency Management Agency and Army Corps of Engineers following Hurricane Irene, Tropical Storm Lee, wildfires and tornadoes so far this year.

House Republicans have passed a bill that cuts spending elsewhere to offset some of the increased disaster relief aid. Democrats oppose offsets for emergency aid, saying disaster relief for Americans in need should be unencumbered. The Democratic-led Senate rejected the House measure on Friday by a 59-36 vote.

The package would fund the government for the first seven weeks of the new fiscal year that starts Saturday.

For the third time in six months, a partial government shutdown is possible if the Republican-led House and Democratic-controlled Senate fail to agree on the short-term spending plan by Friday -- the end of the current fiscal year.

The measure currently under deliberation -- which would keep Washington running through Nov. 18 -- includes critical new disaster funding assistance for states hit hard by Hurricane Irene, Tropical Storm Lee, and a series of recent wildfires and tornadoes.

But Republicans want less disaster aid than their Democratic counterparts, and want to pay for it partly by cutting funding for programs designed to spur clean energy innovation.

The House passed a "common sense measure," House Speaker John Boehner, an Ohio Republican, told reporters during the Senate vote. "It's time for the Senate to move."

Senate Majority Leader Harry Reid, a Nevada Democrat, announced his intention to push for a new vote Monday on a compromise package incorporating the GOP's lower overall disaster relief spending levels while eliminating any cuts to clean energy programs.

Congressmen and senators need to "cool off for a little bit," Reid said Friday. "There's a compromise here."

"More reasonable heads will prevail," he predicted.

Meanwhile, the agency responsible for doling out disaster relief money -- FEMA -- could run out of funds as soon as Monday, according to Reid.

"If Congress does allow the balance of the Disaster Relief Fund to reach zero, there are laws that govern federal agency operations in the absence of funding," according to a FEMA statement released Friday. "Under law, FEMA would be forced to temporarily shut down disaster recovery and assistance operations, including financial assistance to individuals until Congress appropriated more funds. This would include all past and current FEMA recovery operations."

FEMA spokeswoman Rachel Racusen told CNN Friday that the agency is exploring other funding options as a way to continue providing disaster relief.

The House GOP legislation includes $3.65 billion in new disaster relief funding -- $1 billion in emergency funds available when the bill is enacted and roughly $2.6 billion to be budgeted for those federal response agencies for the 2012 fiscal year that begins October 1.

One key sticking point is that the House bill requires that the $1 billion in immediate disaster funding be offset with $1.5 billion in cuts to a loan program that helps automakers retool their operations to make more fuel-efficient cars. Another $100 million would be cut from an alternative energy loan program that provided funding for the solar panel firm Solyndra, a company that declared bankruptcy late last month despite receiving a $535 million federal guarantee in 2009.

Last week, the Senate passed a spending bill with bipartisan support that would provide $6.9 billion for FEMA and other federal agencies, to be used both for immediate disaster relief as well as in the new fiscal year. The Senate version required no spending offsets.

Democrats have said they will continue to oppose any offsets to counter the emergency spending for natural disasters.